L3HARRIS TECHNOLOGIES, INC. (LHX): what the price requires
At today's price, L3HARRIS TECHNOLOGIES, INC. (LHX) is priced for -2.1% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/LHX
Headline
| Field | Value |
|---|---|
| Ticker | LHX |
| Company | L3HARRIS TECHNOLOGIES, INC. |
| Current price | $289.11/sh |
| Composition | CS (Communication Systems) 26% / IMS (Integrated Mission Systems) 30% / SAS (Space & Airborne Systems) 31% / AR (Aerojet Rocketdyne) 13% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 1.9% |
| Operating margin today | 10.2% |
| Margin compression implied | -8.3pp |
| Implied growth | -2.1% |
| Multiple paid | 16x operating income |
The operating-margin requirement is derived from the framework's value band at year 11, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.5% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.8pp.
Reconcile: at the x-ray's 9.3% required return this reads ~9.7%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.99σ |
| cohort percentile (of 225 peers) | 28 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.98x | 5 | expensive |
| Earnings | 2.90x | 5 | expensive |
| Relative | 1.05x | 5 | expensive |
| Growth | 0.95x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $303.96 | 0.95x | yes | FCF base $2.7B, growth 6% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection |
| DCF Exit Multiple | Growth | $305.63 | 0.95x | yes | Exit EV/EBITDA: 10.3x / 12.3x / 14.3x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $275.56 | 1.05x | yes | P/E 22x (static sector reference · 2026-04), scenarios: 18.4x / 22.0x / 25.6x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $99.54 | 2.90x | yes | BV/sh $104.63, ROE (TTM) 8.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $97.11 | 2.98x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $237.69 | 1.22x | yes | Rev $38.7B, growth 6% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.4x / 1.6x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $110.52 | 2.62x | yes | EPS $9.21, growth 11% (input: historical EPS growth), PEG=2.81 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $67.10 | 4.31x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $2.06B × (1−13%) / WACC 8.5% → EPV (no growth) |
| Residual Income | Asset | $96.70 | 2.99x | yes | BV $104.63 + 5yr PV of (ROE (TTM) 8.8% − Kₑ 9.3%) × BV; BV grows 5.7%/yr |
| Graham Number | Asset | $147.24 | 1.96x | yes | √(22.5 × EPS $9.21 × BVPS $104.63) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $336.39 | 0.86x | yes | EBITDA $5.16B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $101.21 | 2.86x | yes | FCF $2589.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $94.60 | 3.06x | yes | SBC-adj FCF $2.47B (FCF $2.59B − SBC $0.12B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $237.93 | 1.22x | yes | EPS $9.21 × (8.5 + 2×11.2%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $24.31 | 11.89x | yes | BV $104.63 × (ROIC 2.0% / WACC 8.5%) |
| P/Sales Sector | Relative | $411.42 | 0.70x | yes | Revenue $38.69B × sector P/S 2.0x |
| PEG Fair Value | Relative | $154.20 | 1.87x | yes | EPS $9.21 × (PEG 1.5 × growth 11.2% (input: historical EPS growth)) → PE 16.7x |
| Earnings Yield | Earnings | $99.57 | 2.90x | yes | EPS $9.21 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $9.2b |
| Net debt / NOPAT (after-tax) | 2.67x |
| Net debt / operating income (pre-tax) | 2.32x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- L3Harris is a four-segment defense prime where the spine is communications, mission systems, and space-and-airborne electronics, with the Aerojet Rocketdyne propulsion business it bought in 2023 now the fastest-growing piece against a backdrop of missile-defense demand.
- The central risk is concentration: the 10-K states the company is "highly dependent on revenue from U.S. Government customers, primarily defense-related programs with the DoW", so a budget continuing-resolution or program cancellation hits the whole book at once.
- The next markers are the planned IPO of the missile business and quarterly print cadence; FY2026 EPS guidance was raised to $11.40 to $11.60 after Q1, so watch whether the order intake keeps the two-times-revenue backlog growing.
Bull Case
Start with where the money has been moving. Revenue grew over $600 million in the most recent quarter, about 15% organically, and management lifted full-year EPS guidance to $11.40 to $11.60 from $11.30 to $11.50. That is not a company coasting on a fixed government budget line. It is one whose order book is filling faster than it can recognize the revenue, and the gap between bookings and recognition is the bull case in one sentence.
The mechanism is backlog. The FY2025 10-K reports contractual backlog of "$38.7 billion, of which $26.9 billion was funded backlog", and on the Q1 call management put total backlog at over $40 billion, roughly twice annual revenue. Backlog at that depth is what lets a defense prime forecast with confidence: the 10-K expects to recognize about 45% of the contractual backlog by the end of fiscal 2026 and about 70% by the end of fiscal 2027. The work is already signed; execution, not demand, is the variable. Inside that book, the segments are tilting toward the parts the market wants most. The Aerojet Rocketdyne segment "includes missile solutions with propulsion technologies for strategic defense", and it is the smallest segment at roughly 13% of the mix today, which is exactly why it matters: propulsion is the supply bottleneck in a missile-restocking cycle, and a small, fast-growing segment compounds harder than a large mature one. Communications, the legacy core, is improving on its own terms, with the 10-K noting CS segment operating income rose in fiscal 2025 "primarily due to LHX NeXt driven cost savings", the internal program management runs to take cost out of the merged Harris and L3 footprint.
The capital story reinforces the operating one. Share count has been drifting down at roughly 0.9% a year, so per-share figures get a tailwind without management having to manufacture one, and the propulsion business is being teed up for an IPO that would surface a value the consolidated multiple buries. The competitive set is selective by design. The peer cohort here runs to aerospace and defense names like HEICO, AAR, Garmin, and StandardAero, but L3Harris occupies a specific niche: cryptographic hardware, resilient communications, and space sensing, the unglamorous electronics layer that sits inside almost every missile-defense architecture rather than competing to build the interceptor itself. That positioning is why the same Golden Dome missile-defense push that lifts the primes lifts L3Harris regardless of which platform wins, and it is the durable version of the bull thesis.
Bear Case
The whole thesis rests on one revenue stream, and the bear case starts by naming it. The price today pays for the missile-defense and resilient-communications narrative to keep building, but that narrative depends entirely on a single customer whose budget is set by Congress. The 10-K is blunt: the company is "highly dependent on revenue from U.S. Government customers, primarily defense-related programs with the DoW", and it adds that "the U.S. Government may choose to use other contractors as part of competitive bidding". A continuing resolution, a program restructuring, or a shift in procurement priorities does not trim one segment; it reprices the entire book. The most fragile assumption baked into the price is that defense spending growth, and L3Harris's share of it, both hold for years, not quarters.
Run the price against what the business has actually demonstrated and the stretch shows. The market is paying roughly 16 times company-wide operating income, and at today's price the embedded assumption is modest on rate but demanding on duration: the company-wide operating profit has to be sustained, not accelerated, but sustained for a long stretch at a margin the business has not historically widened. The company earns about a 10% operating margin today. The price needs that to hold while the asset-value and earnings-power lenses both read the stock as expensive: the price sits roughly three times above where book-value-plus-profitability methods and the pure earnings-power read land. Only the peer-multiple and forward-growth lenses defend the price, and they defend it precisely because they credit growth and a sector multiple held flat. If the growth fades or the sector multiple compresses, the static methods are the floor, and that floor is far below today's price.
The balance sheet is the second pressure point. Net debt sits around $9.2 billion, roughly 2.3 times trailing operating income, a legacy of the L3 merger and the Aerojet acquisition. That is serviceable while the order book grows and cash converts, but it removes the cushion. The 10-K notes interest expense is not separately broken out in a way that lets coverage be computed cleanly, which is itself worth flagging: a defense prime carrying this much debt into a higher-rate environment has less room to absorb a program slip or a working-capital swing than the backlog headline suggests. The bull points to a two-times-revenue backlog; the bear points out that backlog is a memorandum of future work, not cash in hand, and the cash still has to be earned program by program against fixed-price contracts where the cost overruns land on L3Harris, not the customer.
Valuation
What the price is paying for is duration, not acceleration. At today's level the market values L3Harris at roughly 16 times company-wide operating income, and inverting that price points to a company-wide operating profit path of about negative 2% a year over a five-year window, which sounds bearish until you read it correctly: the near-term pace is within what the company has recently delivered, and the demand is on how LONG that steady profitability must persist, not on a heroic growth rate. The bet is endurance of a mature, government-funded earnings stream, priced in the lower half of the defense-peer multiple range.
The methods split cleanly into two camps, and the split is the whole story. The forward-growth lens, built on discounted cash flow and an exit multiple, lands essentially on top of the price: the DCF perpetual-growth model reaches it on a roughly 6% growth assumption and the exit-multiple model gets there holding today's EV/EBITDA flat for the forecast. The peer-multiple lens agrees, anchoring on a roughly 22-times sector P/E. But the asset-value and earnings-power lenses say expensive, by a wide margin. The pure earnings-power read, which capitalizes normalized operating profit with no growth credit, sits far below the price, and the book-value-plus-profitability methods land near $100 a share against a market price near $295 (June 27, 2026). The reason is visible in the inputs: return on equity around 8.8% sits just under the cost of equity near 9.3%, so the excess-return methods generate almost no premium over book value of $104.63 a share. Translated, the static methods say the demonstrated economics support roughly book value, and everything above that is the market paying for growth and a sector multiple to hold.
Cohort position sharpens it. The reported peer set, anchored by HEICO, AAR, and StandardAero on the aerospace-and-defense aftermarket side and Boeing on the platform side, trades on the same forward-demand premium, so L3Harris is not an outlier within its cohort; it is mid-pack on a sector-wide bet. Solvency is the constraint to weigh against the optionality. Net debt of about $9.2 billion, roughly 2.3 times operating income, with liquid assets of only $590 million, means the company carries the missile-restocking cycle on a balance sheet that has limited slack. The funded portion of backlog, $26.9 billion of the $38.7 billion total per the 10-K, is the real downside support: that is work the government has appropriated money for, and it is the part of the order book that does not depend on next year's budget fight.
Catalysts
The Q1 FY2026 print was the recent catalyst and it cut in the bull's favor. EPS came in at $2.72 against a $2.52 consensus, and revenue of $5.7 billion beat the roughly $5.43 billion expected, a beat driven by about 15% organic growth. Management raised full-year revenue guidance to a $23 to $23.5 billion range and EPS guidance to $11.40 to $11.60, and emphasized that backlog now runs to roughly twice annual revenue. The strategic framing pointed at space sensing and missile defense, aircraft ISR missionization, resilient communications, and missiles and munitions as the priority growth lanes.
The structural catalyst ahead is the planned IPO of the missile-solutions business, which management has flagged under the name Axyv, alongside a $1 billion Department of War investment in that area. A separate listing of the propulsion and missile unit would surface a standalone value for the segment that is currently buried inside the consolidated multiple, and it is the clearest near-term path to closing the gap between the static methods and the price if the spun unit prices at a growth multiple. Sentiment has tracked the missile-defense theme: the stock carries a median Wall Street price target of $390 with 15 buy ratings against six holds and no sells, and the Golden Dome missile-defense initiative has been the recurring upgrade driver, with L3Harris positioned in the secure-communications, cryptographic-hardware, and space-sensing layers of that architecture rather than as a platform prime. The watch items are concrete: execution on the two-times-revenue backlog, the timing and pricing of the missile-business IPO, and whether the federal budget path that funds Golden Dome survives the appropriations process intact.
Peer Cohorts (Per Segment, With Filing Citations)
CS (Communication Systems) (reported)
- GD (GENERAL DYNAMICS CORPORATION)
- (no filing in the citation store)
- LDOS (Leidos Holdings, Inc.)
- (no filing in the citation store)
- MSI (MOTOROLA SOLUTIONS, INC.)
- (no filing in the citation store)
- VSAT (VIASAT INC)
- (no filing in the citation store)
- IRDM (Iridium Communications Inc.)
- (no filing in the citation store)
- CACI (CACI International Inc)
- (no filing in the citation store)
- SAIC (Science Applications International Corporation)
- (no filing in the citation store)
IMS (Integrated Mission Systems) (reported)
- NOC (NORTHROP GRUMMAN CORP /DE/)
- (no filing in the citation store)
- GD (GENERAL DYNAMICS CORPORATION)
- (no filing in the citation store)
- LDOS (Leidos Holdings, Inc.)
- (no filing in the citation store)
- LMT (LOCKHEED MARTIN CORPORATION)
- (no filing in the citation store)
- RTX (RTX CORPORATION)
- (no filing in the citation store)
- HII (HUNTINGTON INGALLS INDUSTRIES, INC.)
- (no filing in the citation store)
- CACI (CACI International Inc)
- (no filing in the citation store)
SAS (Space & Airborne Systems) (reported)
- NOC (NORTHROP GRUMMAN CORP /DE/)
- (no filing in the citation store)
- LMT (LOCKHEED MARTIN CORPORATION)
- (no filing in the citation store)
- RTX (RTX CORPORATION)
- (no filing in the citation store)
- GD (GENERAL DYNAMICS CORPORATION)
- (no filing in the citation store)
- LDOS (Leidos Holdings, Inc.)
- (no filing in the citation store)
- BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
- (no filing in the citation store)
AR (Aerojet Rocketdyne) (reported)
- LMT (LOCKHEED MARTIN CORPORATION)
- (no filing in the citation store)
- RTX (RTX CORPORATION)
- (no filing in the citation store)
- NOC (NORTHROP GRUMMAN CORP /DE/)
- (no filing in the citation store)
- BWXT (BWX Technologies Inc)
- (no filing in the citation store)
- KTOS (Kratos Defense & Security Solutions, Inc.)
- (no filing in the citation store)
- AVAV (AEROVIRONMENT, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
FY2025 10-K · Q1 FY2026 earnings release · Q1 FY2026 earnings call · FY2025 10-K risk factors · analyst coverage summary, June 2026